Payments Ecosystem is not Collaborating again; Setbacks for Apple Pay

In what industry insiders are calling a setback for not only Apple Pay but the entire payments space, CVS and Rite Aid have disabled NFC access on their terminals. This seems to be a common trend amongst MCX (Merchant Customer Exchange) members with Walmart and BestBuy also refusing to accept the platform earlier. This can be attributed to MCX announcing its own wallet - CurrentC - right before Apple Pay was announced and the retailers might feel threatened by the rate of adoption of Apply Pay which is seen as a key early success factor in this space.

This sort of polarization is not new in the payments space, according to Amit Goel, the Co-Founder of LetsTalkPayments, We have seen the same scenario playing out earlier when Google launched its wallet and the carriers blocked it; we have not gone too far since then. Apple Pay was beginning to make the space relevant to the end users and we see the retailers blocking it. We already have hundreds of wallets out there but most of them get trapped in the vicious circle of low adoption among consumers and acceptance infrastructure at merchants. It seems Apple Pay was just breaking out of this cycle.

For the retailers, the problem is not just about making the processing cheaper but also about tracking shopper habits which allows them to have better control of their sales and offer better deals to shoppers at the right time and at the right place. Apple Pay does not allow this and lets its users shop in private without being tracked.

According to MCX, CurrentC will be a repository of loyalty cards and a means of distributing, storing and redeeming digital coupons and special offers. CurrentC’s functions will also integrate directly into MCX members’ branded mobile apps. MCX members are clearing the way for their own digital wallets and aren’t supporting NFC based payments. MCX boasts of a membership of 110,000 retail locations (and growing) including not only the big box retailers but also restaurants, clothing merchants, convenience stores, airport and airline concession companies. Tom Noyes (Payments Expert) was quick to remark on Twitter to our question that the only new NFC merchant added by Apple was Disney. They have a lot of work to do on that front.

The following infographic highlights the polarization:

The 4 major success factors for mobile wallets until now have been user Acceptance, functionality & solution cost, merchant acceptance and company credentials & future potential.

Evaluating CurrentC against these factors, it would not be wrong to say that MCX would face challenges in user acceptance. Smartphone users would have to specifically download the CurrentC app or the retailers’ branded apps (leading to a fragmented experience). MCX would have to educate customers on this new proposition (not expected to be great at that). MCX would probably have an advantage in merchant acceptance for obvious reasons and big retailer brands already have the brand credentials to attract customers.

Apple Pay on the other hand, will hit the home run with respect to user acceptance and company credentials. Apple’s brand recall is at its strongest right now. Also, a growing number of iPhone users have accepted Apple’s payment solution. But merchant acceptance and solution cost is a question.

This practice of not allowing a major player to participate within your ecosystem will only stifle innovation. Retailers need to realize that Apple Pay is a force to reckon with and must find ways to collaborate instead of going against it.